Angered U.S. prosecutors threaten to revoke Black's bail

Prosecutors in Chicago allege that Conrad Black has misrepresented his personal fortune so much that they want a judge to force a sale of his $32-million (U.S.) Florida mansion to secure his bail. Otherwise, prosecutors say they will move to revoke Lord Black's bail, which could put him in jail.

"As it currently stands, defendant has failed to comply with numerous conditions of his current [bail] bond," Patrick Fitzgerald, the U.S. Attorney for the Northern District of Illinois, alleged in a court filing.

The dispute is the latest legal tussle between Lord Black and the U.S. Attorney's office in an ongoing criminal prosecution that won't even go to trial until next March. Both sides have already tangled over access to documents and the seizure of other assets of Lord Black.

Now prosecutors allege he misled them about his financial affairs during negotiations last winter for his $20-million bail. According to the U.S. Attorney's office, Lord Black failed to disclose key details about his personal finances and obligations on his Palm Beach mansion, which he has put up as security for the bail.

Mr. Fitzgerald wants the court to either increase Lord Black's bail by seizing more of his assets, or revoke bail altogether, which could put him behind bars.

Lord Black's lawyers rejected the allegations and said they will respond in court this week. "We believe there are misstatements and half-truths and we will deal with it," Edward Greenspan said.In court filings last week, Lord Black's lawyers asked to have his bail reduced and the conditions modified.

Lord Black's personal finances have been the subject of much debate ever since he and several former executives of Hollinger International Inc. were hit with criminal charges last December over allegations they took $84-million from the Chicago-based company. Lord Black has pleaded not guilty and none of the allegations have been proved.

He was freed on the $20-million bond secured by his Palm Beach, Fla. home, and $8.5-million of cash seized by the FBI last fall when he sold a New York apartment.

In court filings yesterday, Mr. Fitzgerald said prosecutors agreed to the bail conditions only after Lord Black gave them a sworn statement of his finances.

While that statement hasn't been disclosed publicly, Mr. Fitzgerald revealed parts of it yesterday and alleged that Lord Black misrepresented his true net worth.

For example, Mr. Fitzgerald alleged that in the statement Lord Black said he had less than $300,000 in "liquid assets available to post as security," and that none of his four bank accounts at the Canadian Imperial Bank of Commerce contained more than $34,000 (Canadian).

And yet, Mr. Fitzgerald alleged, on April 24, Lord Black wrote a cheque for $460,279 (U.S.) on a CIBC account to cover property taxes in Florida.

The U.S. Attorney also wondered how Lord Black could afford a reported $500,000 (Canadian) donation to the Canadian Opera Company, given what he disclosed in the financial statement.

Mr. Fitzgerald alleged Lord Black also withheld key details about his interest in Horizon Operations Ltd., which owns nearly 40 newspapers in the U.S. and Canada, including the Kelowna Daily Courier.

Lord Black controls Horizon with his onetime right-hand man David Radler, a former Hollinger executive who has pleaded guilty to one fraud charge in the criminal case and is co-operating with prosecutors.

Prosecutors allege Lord Black and Mr. Radler conspired to sell some Hollinger papers to Horizon at a discount. Lord Black rejects the allegation, which has not been proved.

However, Mr. Fitzgerald alleged yesterday that Lord Black failed to disclose that he transferred part of his ownership in Horizon to his wife, Barbara Amiel Black, and that they have received a $16-million offer for the holding.

Prosecutors now want to seize that holding.

Lord Black has also allegedly misrepresented the extent of his continuing dispute with the Canada Revenue Agency, according to Mr. Fitzgerald.

Lord Black indicated to prosecutors that the CRA has a $13-million to $14-million (Canadian) lien on the Palm Beach house as part of a tax dispute.

In a court filing, Lord Black indicated that he is "in the process of resolving" the tax dispute.

In its filing, the U.S. Attorney alleged the lien is actually $16.3-million and the dispute is far from being resolved.

Mr. Fitzgerald also indicated that Lord Black has defaulted on a $10-million (U.S.) loan secured by the Palm Beach house.

According to documents filed in court, Lord Black took out the loan on May 16, 2005, from Houston-based Laminar Direct Capital LP. The loan carried a 21-per-cent interest rate and was to be fully paid by May 15, 2006.

Lord Black recently asked for three extensions on the loan, according to court filings, and Laminar agreed so long as he made a $500,000 payment and received approval from the U.S. Attorney.

Mr. Fitzgerald said his office agreed to a couple of short extensions but refused after the third request unless Lord Black revealed details about his CRA lien.

Lord Black has balked at that request, arguing it is inappropriate.

Laminar, meanwhile, has indicated that it will pursue foreclosure if the loan issue isn't resolved within a few weeks.

Mr. Fitzgerald moved to force a sale of the home, arguing the loan issue and threat of foreclosure devalues the property, which is the primary security for Lord Black's bail.

He alleged the property is worth less than the $32-million quoted by Lord Black.

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